The Effects of Local Economic Activity on Crime: Evidence from Oil Price

Abstract

We exploit plausibly exogenous changes in the value of reserves in Texas's giant oil fields to determine the impact of crime in Texas counties that have reserves. Texas provides an ideal setting for this research strategy. First, Texas has the largest number of giant oil fields. Second, Texas's giant oil fields possess the greatest remaining oil potential. Third, giant oil fields are dispersed throughout the state. We find that a one percent increase in the lagged value of oil reserves increases violent crime by 0.32%, aggravated assaults by 0.40%, sex offenses by 0.40-0.50%, and drug offenses by 0.40 %. We find that changes in the value of oil reserves in counties adjacent to a given county have no effect on crime in that county. This is evidence of crime creation and not displacement of criminal activities across counties. We explore potential mechanisms that could be driving this increase in crime and find an increase in the share of young males and no increase in the size of the police force

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